Last month, the Federal Reserve hiked the benchmark interest rates by 75 basis points, the most since 1994, and indicated further hikes to fight the surging inflation. Many analysts expect the central bank’s move to push the economy into a recession.
Concerns over these macroeconomic headwinds have kept the stock market under tremendous pressure. The S&P 500, the most widely followed benchmark for U.S. stocks, recorded its worst first half this year in more than 50 years.
Amid rising recessionary concerns and consequent market slump, investing in fundamentally strong dividend-paying stocks could help hedge one’s portfolio against the market risks by generating a steady income stream.
We think it could be wise to scoop up the shares of fundamentally sound dividend stocks Embotelladora Andina S.A. (AKO.B), Bristol-Myers Squibb Company (BMY), Bayer Aktiengesellschaft (BAYRY), A.P. Møller - Mærsk A/S (AMKBY), and Honda Motor Co., Ltd. (HMC), which are currently trading at discounts to their peers.
Embotelladora Andina S.A. (AKO.B)
Headquartered in Santiago, Chile, AKO.B is a bottler of Coca-Cola Company (KO) trademark beverages in Chile, Brazil, Argentina, and Paraguay. The company offers fruit juices, sports drinks, mineral and purified water, and PET bottles.
On April 19, 2022, AKO.B and the Coca-Cola system in Brazil announced the agreement to distribute Campari Group’s products. The partnership is expected to benefit the companies and their portfolios significantly.
AKO.B’s trailing-12-month dividend translates to a 13.14% yield.
AKO.B’s net sales increased 22.6% year-over-year to CLP 624.23 billion ($649.18 million) in the first quarter of 2022. Its operating income grew 20.6% from the year-ago value to CLP 95.42 billion ($99.23 million), while its adjusted EBITDA improved 19.1% year-over-year to CLP121.38 billion ($126.23 million).
In terms of forward non-GAAP P/E, AKO.B’s 9.57x is 45.9% lower than the 17.69x industry average. The stock’s 0.82x forward EV/S is 55.1% lower than the 1.82x industry average.
Analysts expect AKO.B’s EPS and revenue for fiscal 2023 (ending December 2023) to increase 14.9% and 7.1% year-over-year to $1.26 and $2.70 billion, respectively. Over the past month, the stock has declined 12.4% to close the last trading session at $10.51.
AKO.B’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Value and a B grade for Growth, Stability, and Quality. Within the A-rated Beverages industry, it is ranked #3 out of 36 stocks. Click here to see the other ratings of AKO.B for Momentum and Sentiment.
Bristol-Myers Squibb Company (BMY)
BMY is a biopharmaceutical company offering pharmaceutical products for treating hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and Covid-19 diseases.
On June 24, 2022, the company received FDA’s approval for CAR T cell therapy Breyanzi for relapsed or refractory large B-cell lymphoma after one prior treatment. With this approval, Breyanzi diversifies BMY’s cell therapy portfolio and reinforces its leadership in delivering innovative cancer treatments.
BMY’s four-year average dividend yield is 3.02%, and its forward annual dividend of $2.16 translates to a 2.83% yield. The company has increased its dividend for 15 consecutive years. Its dividend has grown at an 8.9% CAGR over the past three years. On June 15, 2022, the company’s Board of Directors declared a quarterly dividend of $0.54 per share, payable on August 1, 2022.
For the first quarter ended March 31, 2022, BMY’s total revenues increased 5% year-over-year to $11.64 billion. Its non-GAAP gross profit grew 6.7% year-over-year to $9.23 billion, while its non-GAAP net earnings attributable to BMS rose 7.1% from the year-ago value to $4.25 billion. The company’s non-GAAP EPS increased 12.6% from its prior-year quarter to $1.96.
BMY’s 10.06x forward non-GAAP P/E is 48.1% lower than the 19.37x industry average. Its 10.12x forward EV/EBIT is 39.2% lower than the 16.65x industry average.
Analysts expect BMY’s EPS and revenue to increase marginally year-over-year to $7.58 and $46.41 billion in the current year ending December 31, 2022. BMY surpassed the consensus EPS estimates in each of the trailing four quarters.
The shares of BMY have gained 28.8% over the past nine months and 22.3% year-to-date. It closed the last trading day at $76.22.
BMY’s POWR Ratings reflect solid prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
It also has an A grade for Value and a B grade for Growth and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #5 of 172 stocks. To see additional POWR Ratings for Momentum, Stability, and Sentiment for BMY, click here.
Bayer Aktiengesellschaft (BAYRY)
Headquartered in Leverkusen, Germany, BAYRY operates as a life science company through three segments: Pharmaceuticals, Consumer Health, and Crop Science.
On June 8, 2022, the company’s subsidiary Bayer’s BlueRock Therapeutics LP established a new site for cell therapy innovation in Berlin. This move expands the company’s geographical footprint and strengthens BAYRY’s cell therapy capabilities.
BAYRY’s four-year average dividend yield is 4.95%, and its current dividend translates to a 3.67% yield. The company paid a $0.53 per share quarterly dividend on May 16, 2022.
BAYRY’s net sales increased 18.7% year-over-year to €14.64 billion ($14.95 billion) for the first quarter, ending March 31, 2022. Its EBIT grew 36.6% from its year-ago value to €4.21 billion ($4.30 billion), while its net income improved 57.5% from its prior-year quarter to €3.29 billion ($3.36 billion). The company’s EPS rose 57.3% year-over-year to €3.35.
In terms of forward EV/S, BAYRY’s 1.79x is 52% lower than the 3.73x industry average. Its 7.37x forward non-GAAP P/E is 62% lower than the 19.37x industry average.
Analysts expect BAYRY’s revenue for the quarter ending September 30, 2022, to increase marginally year-over-year to $11.47 billion. The Street expects its EPS to increase 4.6% year-over-year to $0.32 in the quarter ending September 30, 2022. The company surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 8.1% year-to-date to close the last trading session at $14.33.
BAYRY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The stock also has an A grade for Growth and Value and a B for Stability. Within the Medical – Pharmaceuticals industry, it is ranked #6.
Beyond what we have stated above, we have also given BAYRY grades for Momentum, Sentiment, and Quality. Get all the BAYRY ratings here.
A.P. Møller - Mærsk A/S (AMKBY)
Headquartered in Copenhagen, Denmark, AMKBY operates as an integrated transport and logistics company through its four segments: Ocean, Logistics & Services, Terminals & Towage, and Manufacturing & Others.
On May 4, 2022, the company initiated the second phase of its share buyback program from May 5, 2022, up to November 1, 2022. In this phase, the company will acquire a total market value of up to DKK 8 billion shares (around $1.15 billion). Only a maximum of 150,000 A shares and 600,000 B shares can be acquired in the second phase.
AMBKY’s dividend payouts have grown at a 76.6% CAGR over the past five years. Its four-year average dividend yield is 6.2%, and its current dividend of $1.85 translates to a 16.86% yield.
In the first quarter, ending March 31, 2022, AMKBY’s total revenue increased 55.1% year-over-year to $19.29 billion. Its net profit grew 150.6% from its year-ago value to $6.81 billion, while its EPS increased 161.2% from its prior-year quarter to $363.
The stock’s forward non-GAAP P/E of 1.68x is 88.7% lower than the industry average of 14.93x. In addition, its forward EV/Sales and EV/EBITDA ratios of 0.57x and 1.39x are lower than the industry averages of 1.54x and 9.63x, respectively.
For the second quarter ending June 30, 2022, AMKBY’s revenue is expected to increase 39.5% year-over-year to $19.86 billion. AMBKY has declined 17% over the past three months to close the last trading session at $10.98.
AMKBY’s POWR Ratings reflect solid prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Growth, Momentum, and Quality. Within the A-rated Shipping industry, it is ranked #First out of 44 stocks. To see the other ratings of AMKBY for Stability and Sentiment, click here.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC is engaged in producing and selling motorcycles, automobiles, and power products. It also sells spare parts and provides after-sales services directly through retail dealers, independent distributors, and licensees. The company operates through four business segments: Motorcycle, Automobile, Financial service, and Life creation.
On June 21, 2022, HMC’s China subsidiary Honda Motor (China) Investment Co., Ltd., announced that its automobile production and sales JV, GAC Honda Automobile Co., Ltd., began constructing a new EV plant. With an initial investment of RMB3.49 billion ($521.81 million) and the adoption of advanced production technologies, this highly efficient, smart, and low-carbon EV plant will possess an annual production capacity of 120,000 units from 2024 onward.
On June 16, 2022, Sony Group Corporation and HMC entered into a JV agreement to establish a new company, ‘Sony Honda Mobility Inc.,’ to sell high-value-added EVs and provide services for mobility. This strategic alliance is expected to generate substantial revenues in the upcoming years.
HMC’s four-year average dividend yield is 3.31%, and its forward annual dividend translates to an 8.48% yield. The company’s dividend has grown at a 3.1% CAGR over the past five years.
For the fiscal year ended March 31, 2022, HMC’s sales revenue increased 10.5% year-over-year to ¥14.55 trillion ($107.34 billion). Its operating profit rose 32% year-over-year to ¥871.23 billion ($6.43 billion), while its profit for the year attributable to owners of the parent came in at ¥707.06 billion ($5.21 billion), up 7.5% from its year-ago period. HMC’s EPS came in at ¥411.09, indicating a 30.34% year-over-year increase.
HMC’s 0.62x forward EV/S is 41.3% lower than the 1.06x industry average. Its 3.04x forward P/Cash Flow is 62.4% lower than the 8.09x industry average.
For the current year ending March 31, 2023, HMC’s EPS and revenue are expected to increase 2.2% and 352.6% year-over-year to $2.80 and $120.88 billion, respectively. Shares of HMC have declined 7.3% over the past month to close the last trading session at $23.40.
HMC has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has an A grade for Value and a B grade for Stability and Quality. Also, it is ranked first out of 66 stocks in the Auto & Vehicle Manufacturers industry.
In addition to the POWR Ratings I’ve just highlighted, you can see the HMC ratings for Growth, Momentum, and Sentiment here.
AKO.B shares were trading at $10.64 per share on Thursday afternoon, up $0.13 (+1.24%). Year-to-date, AKO.B has declined -9.95%, versus a -17.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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